VW Engineer Is Sentenced -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 26, 2017).

A Volkswagen engineer was sentenced to 40 months imprisonment and will pay a $200,000 fine for participating in the German auto giant's emissions-cheating deception after cooperating with U.S. prosecutors in their criminal investigation of the yearslong conspiracy to defraud government officials and customers.

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James Liang, 63 years old, received the sentence from U.S. District Judge Sean Cox on Friday morning during a hearing in a Detroit federal court. Mr. Liang in September pleaded guilty to one count of conspiring to defraud the U.S., commit wire fraud and violate the Clean Air Act for his role in helping Volkswagen evade emissions requirements with diesel-powered vehicles.

Mr. Liang, a German national, has agreed to be removed from the U.S. following his prison term, according to prosecutors. He moved to and settled in the U.S. with his family in 2008 to help Volkswagen launch diesel-powered vehicles and handled certification, testing and warranty issues, prosecutors said.

The more than three years in prison the judge imposed exceeded prosecutors' recommendation. They had asked that Mr. Liang receive three years imprisonment and a $20,000 fine.

Mr. Liang is one of eight individuals charged in a U.S. Justice Department probe of Volkswagen's nearly decadelong conspiracy to rig nearly 600,000 diesel-engine vehicles with illegal software that allowed them to cheat on government emissions tests while polluting far beyond legal limits on the road. Volkswagen, which has acknowledged the software is on about 11 million vehicles globally, earlier this year pleaded guilty to criminal charges in the U.S. stemming from the deception and agreed to pay billions of dollars in penalties.

Mr. Liang was dressed in a dark green suit during Friday's hearing, with his wife and three children seated in the first row of the courtroom. Speaking on behalf of Mr. Liang, his counsel Daniel Nixon said he has taken the right steps by cooperating with the U.S. government and he's "not a greedy man, he's not a criminal in the sense of preying on others. We're not saying he didn't commit a crime, but he's a good and decent person. He blindly executed a crime because of a misguided loyalty to his employer."

Judge Cox said Mr. Liang was an "important member of a long-term conspiracy involving Volkswagen engineers and senior management. This is a stunning fraud on the American consumer. This is a very serious and troubling crime against our economic system."

Mr. Liang, an engineer at Volkswagen since 1983, helped the auto maker install so-called defeat devices on diesel-powered vehicles after he and his colleagues realized the engines couldn't meet stringent U.S. emissions limits while maintaining the fuel economy and performance customers expected, prosecutors said in a legal memorandum filed before Friday's sentencing.

Mr. Liang "was instrumental in calibrating the vehicles" so they would fully engage pollution controls during laboratory emissions tests and then reduce their effectiveness on the road to allow nitrogen oxide to be released from tailpipes at over 30 times the legal limit, according to prosecutors. In addition to working on the illegal software, Mr. Liang helped Volkswagen mislead environmental regulators when they questioned the auto maker's emissions practices.

Mr. Liang cooperated with prosecutors in the early stages of their investigation of Volkswagen and its employees. The engineer's help included "extensive debriefings with the government in which he provided an insider's perspective of a company that had lost its ethical moorings in pursuit of increased market share and corporate profits," prosecutors said.

Mr. Liang's cooperation with prosecutors provided evidence that helped lead to charges against others who worked at Volkswagen, including Oliver Schmidt, who led the auto maker's environment and engineering office in Michigan for several years.

Mr. Schmidt earlier this month pleaded guilty to charges of conspiracy and violating environmental law for concealing the use of illegal emissions software from U.S. and California regulators. He was arrested in January at Miami International Airport before boarding a flight to Germany.

A former engine-development manager at Volkswagen luxury-unit Audi was charged in July. Others charged are believed to reside in Germany and aren't likely to be extradited to the U.S. to face charges.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and Mike Spector at mike.spector@wsj.com